Many entrepreneurs think that risk is just an “occupational hazard” that can be minimized or eliminated by a smart businessman. That way of thinking is simplistic and wrong. In reality, some risks are good and should be embraced for growth and a competitive edge, while others are bad and should be avoided completely. Traditional risk management focuses only on bad risks, and seeks to contain losses. But if you want growth and sustainability, you need to embrace strategic risk, which means intentionally taking a risk to grow your business or gain competitive advantage. In fact, entrepreneurship is all about taking the right strategic risks, while minimizing other risks. Here are some simple examples of “good” strategic risks that you should be working on; 1. Deliver an innovative solution to a painful customer problem This can be high risk if your solution doesn’t work, or your price is more painful than the problem. A bad risk is assuming that you because you like the solution, everyone will buy it, or that you can build an existing solution cheaper than anyone else.
2. Plan to replace your product with a better and cheaper one Probably more companies fail by avoiding this strategic risk than any other. If the current product is making money, it seems like a bad risk to obsolete it. Yet, new technology can quickly blindside you, and market dynamics change, plus you need to broaden your opportunity.
3. Build a dynamic product line rather than a single product. Every new product you add stretches your ability to deliver winning function and quality. Yet a great initial product, with no follow-on, will not keep you ahead of competitors. Take the strategic risk.
4. Implement a new business model
Software as a service (SaaS) has now pretty much replaced the old licensing model, but offering it was a strategic risk for SalesForce.com. Proactively implementing new business models, like...